EDC helping Telefonica finance BlackBerry purchases

Canada’s Export Development Corporation (EDC), a crown corporation, is providing Telefonica with a 200 million euro loan to buy BlackBerry products. That works out to about $255 million US dollars, and if we assume it’s for BlackBerry 10 products, it suggests Telefonica is buying somewhere between 500,000 and 700,000 devices depending on the price assumptions you make. Remember that BlackBerry will be releasing more models with different price points.

So the order isn’t going to be earth shattering, but it’s nice to see things progressing on the rollout of BB10. Telefonica is a Spanish operator, but they’re also pretty big in Latin America.

EDC gets involved in a lot of transactions like this. I’m not an expert in EDC financings by any means, but I have seen plenty of them in my time covering Canadian stocks. When the EDC gets involved it just greases the wheels a bit, making it easier for BlackBerry to do business with with the buyer, Telefonica.

That’s why I find it so frikkin’ annoying when you get people writing the kind of stuff that TechCrunch wrote today.

“The deal underscores the fact that while BlackBerry is pushing very hard for a turnaround with the launch of BB10 and a raft of new devices, it still needs to do a lot of legwork to convince carriers that they should be making the extra investment to stock its devices”

Sorry. Wrong. It doesn’t have anything to do with carriers needing some kind of convincing of anything. Perhaps if the writer had bothered to read the whole press release, the mistake could have been avoided. Note in the release below just how long the EDC has been working with Telefonica, and how much involvement the EDC has in dealing with exports to Spain.

Here’s the entire release:

OTTAWA, April 4, 2013 /CNW/ - Export Development Canada (EDC) today announced that it has provided a €200M working capital facility to Telefónica to facilitate the procurement of BlackBerry® smartphones, services and solutions across its worldwide operations.

Telefónica is one of the largest global telecommunications companies, with operations in 24 countries and a customer base of over 315.7 million subscribers. EDC's working capital facility will facilitate BlackBerry market share growth within Telefónica.

"EDC's financing is really about making the transactions between BlackBerry and Telefónica easier, helping to enhance and broaden the relationship between these two major global players," said Lewis Megaw , Regional Vice President Africa Europe and the Middle East, EDC.

EDC has provided financing to Telefónica since 2006 in support of its various Canadian procurement needs.

Two-way trade between Canada and Spain reached CAD 2.6 billion in 2012, primarily in the ICT, Aerospace and Extractive sectors. Of that, over 500 Canadian companies used EDC's services to undertake more than CAD 414.8 million in trade with Spain in 2012.

In 2012, over 1,000 Canadian exporters and investors in the ICT sector used EDC products and services to facilitate more than CAD 8.4 billion in international business.

I am a economics major and I can understand how Chris feels about the post by TechChrunch. Some people just want to get their message out whether or not it is accurate and factual. It's unfortunate and hopefully shaming them will help them get their act together.

Maybe you should read the above article again...(or maybe for the first time) & then you will see that your comment is BS. This is nothing to do with Telefonica not being able to afford the phones, the EDC is just being used as a financial conduit for the sale.

You are so smart I am sorry. Since you are so smart maybe you can elaborate what a conduit does? Is it making loans at lower than market rates to foreign companies ultimately backstopped by the Canadian taxpayer if they go sour?

"EDC is financially self-sustaining and does not receive parliamentary appropriations. The income that we generate is applied directly against Canada’s fiscal accounts and it strengthens our capital base. In the first quarter of 2011 we paid a dividend of $350 million to the Government of Canada. We ended the year with a strong capital position of $10.8 billion, which makes us more resilient, with greater capacity to help Canadian exporters and investors navigate the uncertainty and volatility in the current trade environment."

Just a little snippet of info from their 2011 annual report. The EDC does ok.

So it is the job of a bank owned and backstopped by Canadian taxpayers to finance foreign companies at lower than market rates so we can sell products made of components sourced nearly 100% from overseas and assembled in Mexico to them?

This is still just outdated mercantilism and its not even self respecting mercantilism since there are probably almost 0 exports that would show up in the national accounts from this transaction as nothing is even made or assembled in Canada that they are buying. If this was a profitable opportunity for risk weighted capital the private sector would be all over it but they obviously weren't.

I bet this is not the first time you scream about your tax dollars being misused. If you add up all the complaints you had, there's not that much of your tax dollars to be spread around. If you are so keen on how your tax dollars being use, try getting elected and wait to be appointed to be the finance minister. For now, just refrain from using the term my tax dollars. There are millions of my tax dollars taxpayers have yet to voice their concern.

Telefonica is very well known in Latin America under the name Movistar. You can see that carrier almost in every single country down in South America, where i travel quite often for work. In some markets BB still very strong, amazingly even without a top-of-the-line product released for such a long time. For instance in Venezuela you could see people in any segment (from executives to work people) carrying a BB phone. And the same statement is valid for countries like Colombia or Ecuador. So the purchase could be thinking in the Latin American market as well.

Not to sound rude, but that is the nature of a "loan." Telefonica is going to pay interest on the money borrowed to facilitate the purchase. Just as mortgage lenders and car lenders do. Telefonica will, at 5% interest, pay in excess of 12 million dollars in the first year to cover financing of the transaction. Twelve million dollars in addition to the purchase price.

Are you insane?
The more products or intellect that Canada can export. The better for Canadians and Canadian businesses.

This transaction is fantastic.
Canada is losing its industrial and manufacturing sector left right and center. I realize that the BlackBerry phones aren't made in Canada, but it supports a lot of canadian jobs

Just imagine if BlackBerry didn't fall asleep at the wheel a few years back, instead of laying off thousands of people they would have needed to hire more.

Would you rather BlackBerry close it doors and lay everyone off so Korea and California can steal our jobs.

If we all supported Canadian products at least once a day, a piece of fruit a bottle of wine, we would have a much healthier financial position. It's called 'keeping it in the family '

In some ways I agree with you but you have an idealistic notion of how companies work. BlackBerry may have its headquarters in Waterloo but companies exist to make money and they are a multinational company with employees and operations over the world. Their only obligation is to make money for their shareholders and if that means outsourcing jobs or production out of Canada (which they have done) or milking governments to keep jobs in Canada they will do it in a heartbeat. Companies only play the patriotic card as another way to get you to buy their products or services. This is why apple puts "Designed in California" on the inside of their boxes even though they are one of the most profitable companies in the world and still barely manufacture anything in the USA because it wouldn't be as profitable.

Chris:
Love it when you take the lack of others journalistic integrity, or even intelligence, to task. The prevalence of artifice over edifice in todays "blogger" infotainment world, where opinion masquerades as fact and fact is presented as opinion is nicely offset by your vicious strikes with the hammer of truth.
Long live Umi!

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